Clinton didn't actually own any Marion County real estate in 1986 when the Master Marketing loan was negotiated. According to the Pillsbury Report, the virtually unread $3.6 million study of Whitewater done by the government agency supervising the savings-and-loan bailout, Jim McDougal had already peddled the property for pennies on the dollar in 1985, thus ensuring the project's failure, but had neglected to inform his partners, the Clintons. His motive appears to have been a cash-flow crisis among his many commingled real-estate enterprises, as well as a desire to curry favor with the buyer--with whom he was also involved in a multimillion-dollar project in Canada (which also failed).

Of the $50,000 that the New York Times and everybody else reports was used to "prop up" the Clintons' Whitewater investment, $25,000 was a 1985 "bonus" paid to the same realtor. How a 1985 bonus can be paid with the proceeds of a 1986 loan is a long story. What realtor Chris Wade did to earn the bonus also bewildered the authors of the Pillsbury Report: He sold exactly one Whitewater lot in 1985--and only four during the project's entire history. The Whitewater Development Corp. (and thus the Clintons) owed Wade nothing. It appears to be one more example of McDougal using other people's money as if it were his own.

The remaining $25,000 McDougal used for part of a down payment on an 810-acre tract he bought in the name of Whitewater from the International Paper Corp., falsely assuring the sellers--who financed the deal--that he and Susan owned the company outright. Then he transferred the deed to another of his companies, and began another failed development, leaving Whitewater stuck with the debt.

In the meantime, McDougal was besieging the Clintons with letters urging them to sign over their Whitewater stock to him, as he wished to deduct the company's losses from his taxes. Seemingly unaware that the company was a hollow shell stripped of its assets, Hillary Rodham Clinton refused. Again, the Pillsbury Report made no bones about McDougal's treatment of his Whitewater partners. "Their signatures," it noted tartly, "do not appear on the relevant documents. McDougal's letters to them do not mention the transaction. The transaction did not benefit Whitewater or the Clintons; in fact, it left Whitewater with a large mortgage but no corresponding asset, and eventually it led to litigation and the entry of a judgement against Whitewater."

Indeed the deal never appeared on Whitewater's books. When International Paper sued to repossess the property after McDougal defaulted on the loan, he didn't dare involve the Clintons. To be guilty of what Hale and McDougal now charge, Clinton would have had to convince McDougal in 1986 to create a bogus paper trail making it appear that he and Hillary were being taken to the cleaners.

In an apparent effort to make the tale appear more plausible, Jim McDougal told The New Yorker's James B. Stewart that Clinton and Susan McDougal were having an affair at the time. He claimed he was accidentally patched into a telephone call and heard them whispering sweet nothings. He said he confronted her and she confessed. (Susan says Jim wanted her to seduce Clinton, but that she never did.) A few weeks later on Larry King Live, McDougal was asked about "tabloid reports" of an affair between Susan and the president. He replied that he'd sometimes suspected, but had no knowledge of such a relationship.